The Controversy

After the passage of several computing years, the Federal Trade Commission launched a formal investigation into the business practices of Microsoft - the chief software supplier for personal computers - with the U.S. government's primary concern potentially being Microsoft's engagement of illegal business practices. If true, monopolistic conduct, it was feared and argued, would likely harm competing suppliers or computer users themselves. After the U.S. government’s initial investigation, it commenced with judicial action against Microsoft for conducting business in what the U.S. government considered Microsoft’s own selfish interests, rather than those of the public and that of a healthily developing computer software industry (Gilbert, Richard and Michael L. Katz 26).

Predatory behavior is defined by the pricing of one's goods below the cost of producing them – often resulting in the elimination of competing providers. Not surprisingly, once competition is eliminated, the sole provider typically engages in price gouging, a rip-off for buyers. Exclusionary behavior is the deprivation of necessary and otherwise unavailable resources for one's competitors to enable fair competition. Based upon published reports, the United States Department of Justice filed its complaint in July 1994, alleging that Microsoft had utilized both of these forms of illegal practice, including anti-competitive behavior to thwart its competitors’ efforts and strengthen its own monopoly of the software market (Gilbert, Richard and Michael L. Katz 26).

So, what was the foundation for the U.S. government's claim that Microsoft engaged in predatory, exclusionary, and anti-competitive business conduct? Microsoft developed a custom version of the Java middleware for exclusive use with its own products. Java middleware allows programs written by companies other than Microsoft, (various third party applications) to, in principal, run in conjunction with Microsoft’s Windows operating software. By designing a custom form of Java, Microsoft created an additional [code] barrier, making it all but impossible for other software developing companies to write programs for use with computers utilizing Microsoft’s operating system – and, with a huge majority of all computers installed with the Microsoft system, complete exclusion was the result. The U.S. government argued that customizing Java was exclusionary because it forced other software companies into a competitive disadvantage to Microsoft. Microsoft's rebuttal was to argue that there's no 'wrong' with improving Java middleware so as to allow other Microsoft applications to run more smoothly when used with its proprietary Windows' software, and that it was only exercising fierce competition in an already fiercely competitive software industry to sustain its prominence (Gilbert, Richard and Michael L. Katz 31-32).

Adding to the U.S. government's complaint was its assertion that the Microsoft Internet Explorer web browsing software (integrated within Microsoft’s Windows operating system), rose to the level of exclusionary behavior with the results of this integration yielding higher price burdens on computer manufacturers. Manufacturers, who did not enter into contracts requiring their agreement to market the two-in-one combination exclusively, were threatened with having their license to distribute Microsoft’s Windows software, revoked (Cringely). By bundling Internet Explorer with Windows, Microsoft coerced computer manufacturers to sell the Microsoft’s Internet Explorer and Windows combination, resulting in significant difficulty for computer users to employ competing web browsing software. Interestingly enough, Microsoft didn't end its competitive marketing with just the above – it paid selected computer manufactures, such as Apple Computer, to exclusively distribute Internet Explorer with its computers. These practices, the U.S. government would assert, didn't just place competing software companies at a sizable competitive disadvantage – they met the definition of 'exclusionary' because computer users were, for reason of convenience, most likely to default to their using Microsoft's imbedded Internet Explorer - avoiding the inconvenience and [sometimes] added cost of attaining other software. In response, Microsoft explained this business behavior as a simple enhancement to its Windows offering, as if to consider this simply an add-on benefit for improving the personal computing experience, one which would be more user-friendly including the simplification resulting from this integration (Gilbert, Richard and Michael L. Katz 35).

Additionally, the U.S. government was concerned with Microsoft's dominance of the computer industry's operating system software. Not only were few alternatives available, with those few alternatives being much less technologically sophisticated, but also an [significant] increase in price would certainly result in consumers falling victim of extortion.